Bloomberg News

N.Z. Dollar Touches 1-Month High on Stocks Before RBNZ

June 12, 2012

The New Zealand dollar touched an almost one-month high as Asian stocks extended a global rally, sustaining demand for riskier assets.

The so-called kiwi traded 0.3 percent from the strongest in four weeks against its Australian counterpart before a Reserve Bank of New Zealand meeting tomorrow where policy makers are expected to leave interest rates unchanged. The Australia’s dollar slid as data showed the nation’s consumer confidence stagnated near the lowest level this year. Demand for both currencies was limited ahead of a June 17 election in Greece, where debt woes have risked a breakup of the euro zone and shaken global investor confidence.

“When there is a bit of risk appetite, you don’t need much for strength to come back” in the Aussie and kiwi, said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Sydney. “While you want to have some havens, you also want some exposure to inflation hedges.”

The New Zealand dollar earlier touched 77.89 U.S. cents, the highest since May 15, before trading at 77.62 cents as of 11:29 a.m. in Sydney, down 0.1 percent from yesterday when it gained 1.1 percent. It traded at 61.82 yen from 61.81.

Australia’s currency was at NZ$1.2815 from NZ$1.2812 yesterday, when it touched NZ$1.2773, the least since May 11. The Aussie slid 0.1 percent to 99.46 U.S. cents from yesterday, when it jumped 1 percent. On June 11, it touched $1.0009, the highest since May 15. It bought 79.22 yen after advancing 1.1 percent yesterday.

The MSCI Asia Pacific Index (MXAP) of stocks added 0.3 percent, following a 0.7 percent advance in the MSCI’s World Index (MXWO) yesterday. The Standard & Poor’s 500 Index climbed 1.2 percent yesterday.

RBNZ Policy

All 16 economists surveyed by Bloomberg News expect New Zealand’s central bank to keep its key interest rate unchanged at 2.5 percent when policy makers meet tomorrow.

“Should the exchange rate remain strong without anything else changing, the bank would need to reassess the outlook for monetary policy settings,” RBNZ Governor Alan Bollard said in a statement in Wellington on April 26 after holding the official rate.

A Credit Suisse Group AG index based on swaps indicates the RBNZ will lower rates by 14 basis points, or 0.14 percentage point, over the next 12 months, compared to 44 basis points indicated on June 4.

“In previous meetings, RBNZ expressed a lot of concern on the strength of their currency,” said RBS’s Gibbs. “I think that concern will show up less in the statement this time. On balance, we could see the statement being supportive of the kiwi.”

‘Pretty High’

Reserve Bank of Australia Governor Glenn Stevens said in Brisbane today that the nation’s real exchange rate is “pretty high here.” A consumer sentiment index for June rose 0.3 percent to 95.6, a Westpac Banking Corp. (WBC) and Melbourne Institute survey taken June 4-10 of 1,200 consumers showed today in Sydney.

Moody’s Investors Service today said Australia’s top Aaa rating outlook remains stable, and the country’s economic strength is “very high.”

Australia’s government bonds declined, pushing the yield on the 10-year security up by five basis points to 3.03 percent. Yields on the three-year government note rose six basis points to 2.35 percent.

Greece’s election looms as concerns of debt contagion drive bonds lower in Spain and Italy, which is scheduled to sell securities today and tomorrow.

“Europe will remain a key market driver for the foreseeable future,” a Barclays Capital research team led by Larry Kantor wrote in a research note today. Barclays prefers to “fade” rallies in risky currencies.

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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